A sudden and violent outbreak of the Covid-19 epidemic in Ho Chi Minh City (HCMC) and its environs is expected to delay shipments of shoes and apparel and may result in a loss orders for local manufacturers, according to the local NV Express, which cited the shutdown of 29 companies’ operations in the HCMC export zone in recent days.
Vietnam has become the biggest source of footwear for Adidas and Nike, plus other smaller sports brands. The country supplied 42 percent of Adidas’ total volume of shoes in 2020. For Nike, half of its footwear and 28 percent of its clothing came from Vietnam in the financial year ended in May 2020.
There are some 1.6 million workers in HCMC, which has suffered about 16,000 of the 31,000 cases of Covid recorded in Vietnam since April, after a long period of relative calm.
The world’s largest shoe maker, Pou Chen Corp. of Taiwan, has brought its Pouyuen shoe factory in HCMC to a halt for ten days, following the detection of 49 cases of Covid among its staff. With a staff of over 56,000 workers, it is the largest employer in the area and a key supplier of footwear for Nike and Adidas.Reports indicate that the plant was suffering labor shortages in view of mounting orders.
Another major footwear manufacturer, Kingmaker Footwear of Hong Kong, told its shareholders that its factory in Binh Dong Province just north of HCMC was shut down by government order on July 12, two days after the discovery of two confirmed cases of Covid. The order is scheduled to be lifted at the end of this month.
The plant accounted for 69.2 percent of Kingmaker’s total production during its latest financial year, ended March 31. The company’s total revenues slipped by 23 percent to 804.7 million Hong Kong dollars (€87.7m-$103.8m) for the year, with an increase of 11 percent in U.S. sales offset by declines of 15 percent in Europe and 37 percent in Asia.
The company’s gross margin fell by 2.3 percentage points to just 4.8 percent due to lower efficiencies caused by a shift in the production mode to a concept-line system intended for clients who were placing smaller order batches. However, a gain in the fair value of investments and savings in administrative costs allowed Kingmaker to post an attributable net profit of HK88.1 million (€9.6m-$11.3m) against a loss of HK51.4 million in the prior year.
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